Poland imposes corporate and personal income tax on its residents, including Polish subsidiaries of foreign entities, in respect of income and capital gains earned anywhere in the world. Non-residents who carry on business in Poland, are employed in Poland, or sell certain types of properties are also subject to Polish income tax, but only in respect of Polish sources of income. There are no provincial or local income taxes in Poland.

As a rule, companies that have their registered office or place of management in Poland are liable for Polish corporate income tax (CIT) on their worldwide income and capital gains (unlimited tax obligation). If a company does not have its registered office or place of management in Poland, CIT in Poland is levied only on the income and capital gains actually earned in Poland (limited tax obligation). Foreign partnerships that earn income in Poland are also subject to corporate tax in Poland if they are treated as non-tax transparent legal persons in their home country.

A branch of a non-resident company does not constitute a separate entity or a taxpayer for income tax purposes in Poland. Generally, the foreign company will pay tax on income resulting from the branch’s activities and allocated to the branch (usually based on accounting records of the branch).

General anti-avoidance rule (GAAR)

The GAAR applies to legal structures where the main or one of the main purposes of an arrangement (or series of arrangements) is to obtain a tax advantage that is contrary to the subject matter or purpose of a provision of the relevant tax legislation in the given circumstances, provided that the course of action in question is artificial. GAAR can be applied to arrangements that result in a tax advantage on any tax except VAT. Arrangements resulting in VAT benefits may be questioned based on the abuse of law clause formed under the CJEU case law and introduced directly into Polish VAT regulations. On top of the payment of outstanding tax with penalty interest, application of the GAAR (or other tax anti-abuse measures) may also trigger additional tax liability.

Note that the tax environment in Poland has changed drastically over the last few years and is currently rather strict. It should be noted that the policy of the Polish government may be characterized as strongly drifting towards the pro-fiscal approach, which seems to be the result of higher government spending. Thus, properly securing transactions from a potential tax anti-avoidance perspective is crucial.

Mandatory Disclosure Rules (MDR)

Poland implemented the DAC6 Directive and, therefore, if certain conditions (hallmarks) are met, the tax authorities should be provided with information on both cross-border and domestic tax schemes that were either made available to or implemented by certain entities. This obligation rests primarily with the so-called promoters (e.g., tax advisors, legal counsel, attorneys and other experts and professional advisors). However, in specific cases the obligation to report the tax scheme rests with the taxpayer themselves or other participants of the arrangement (e.g., a bank, notary public, statutory auditor, or an advisor who does not meet the criteria for being a promoter).

The schemes, both cross-border and domestic, should principally be reported within 30 days from the date when they were made available or implemented, whichever occurs first.

Moreover, performing any activities, which constitute part of a tax scheme as well as accrual of a tax benefit resulting from the scheme should be reported by the beneficiary by the deadline for submitting a tax declaration relating to the tax settlement period in which any element of the tax scheme was performed or benefit resulting from the tax scheme occurred.

In this chapter 

• Legal system
• Taxation authorities
• Business vehicles
• Financing a corporate subsidiary
• Corporate income tax
• Cross-border payments
• Payroll taxes
• Indirect taxes
• Real estate tax

Legal system 

The Constitution is the supreme law in Poland and the Polish legal system is based on the principle of civil rights. Poland is a member of the EU and its national law must abide by the conditions of its regulations. Poland is a parliamentary republic. The legislative authority is held by the lower house (Sejm) and the upper house (Senat). The government structure is based on the Council of Ministers led by the prime minister. The president is the formal head of state.

Taxation authorities

The National Fiscal Administration (NFA)

The tax system in Poland is administered by the NFA.  The NFA comprises the following offices/bodies:

1. Head of the National Fiscal Administration
2. Director of the National Fiscal Information Service
3. Directors of tax administration chambers
4. Heads of customs and tax offices;and
5. Heads of tax offices.

The heads of tax offices and the heads of customs and tax offices have the primary role of collection, while the directors of tax administration chambers supervise.

Tax rulings, guidelines and opinions

There are two types of tax rulings in Poland: a general tax ruling and an individual tax ruling.

All taxpayers (excluding administrative bodies) may apply for a general tax ruling, or one may be issued ex officio by the Minister of Finance. The aim of a general tax ruling is to ensure the tax authorities apply the law in a uniform fashion.

Individual tax rulings are issued by the director of the National Fiscal Information Service upon any taxpayer’s request (except in cases where, e.g., there is a risk of the application of the GAAR). As a rule, a taxpayer (or taxpayers, in case more than one applicant files a joint tax ruling application) who receives an individual tax ruling and acts in line with its conclusions may benefit from legal protection (such as no obligation to pay tax and penalty interest). Tax authorities may try to question the protection of taxpayers which should result from their individual tax rulings by arguing that the facts of the case differ from the facts presented in the application for an individual tax ruling. Hence, the appropriate formulation and wording of the application for a tax ruling is of key importance.

The Minister of Finance may also publish official tax guidelines on the scope and manner of application of the specific tax law provisions that provide for similar legal protection for taxpayers as acting in line with the individual tax ruling.

Additionally, the taxpayer may apply to the tax authorities for a withholding tax (WHT) preference eligibility opinion concerning available exemptions or reduced tax rates for dividends and interest based on both EU directives and DTTs (see section Cross-border payments below). This allows the tax authorities to examine (and taxpayers to confirm) whether the tests for preferential WHT treatment are met.

A taxpayer is also entitled to apply to the Head of the NFA for an opinion on disallowing the application of the GAAR (parties to the same action may submit a joint application). An opinion should be issued within six months of the filing date of the application and it is subject to a fee of PLN 20,000 (circa €4,500).

Business vehicles

Economic activity is generally free in Poland and foreign entities are allowed to do business in Poland on the terms provided for in the applicable laws. Since Poland is a member of the EU, a company set up in Poland may be used to do business in other EU member states. Generally, a business may be conducted in one of the following forms:

1. A joint-stock company (including a simplified version thereof)
2. A limited liability company
3. A limited partnership
4. A limited joint-stock partnership
5. A branch office of foreign enterprise
6. A representative office of foreign enterprise¹
7. Individual business activity (sole proprietorship).

A limited liability company (LLC) is roughly the equivalent of a private limited company in the UK or a GmbH in Germany. A Polish joint stock company (JSC) is the equivalent of a public limited company in the UK or an Aktiengesellschaft in Germany. The JSC is the required form if the intention is to list a company on a stock exchange. The LLC’s main advantages are lower costs, fewer formalities and flexibility.

A simple joint-stock company is based on flexibility and low requirements for its establishment. The minimum share capital is set at PLN 1. Also, taking up shares in exchange for providing work or services to the company is possible and this may be set up through an instant 24-hour online registration process.

Financing a corporate subsidiary

Equity financing

The two main methods of equity financing are: (1) contributions for shares; and (2) contributions without taking up additional shares (so-called additional payments). In general, a capital contribution to a Polish company is subject to the tax on civil law transactions (TCLT) at the rate of 0.5%. The tax base is the nominal value of share capital increase, whereas the share premium increase is not subject to TCLT. In regard to partnerships, capital contributions are generally subject to 0.5% TCLT on the value of the contribution. Additional payments are always subject to 0.5% TCLT. 

Debt financing

In general, the conclusion of a loan agreement is subject to 0.5% TCLT, except for:

1. Loans granted by foreign entities, not having a registered office or place of management in Poland, which carry on activities in the area of credit services and granting loans;
2. Loans subject to (including exempt from) VAT; and
3. Shareholder loans granted to an LLC or JSC (no minimum shareholding is required).

Tax deductibility of interest

Generally, interest on loans taken out for justified business purposes is tax deductible on a cash basis, i.e., when paid or compounded, if the loan is connected to the taxable revenues of the taxpayer. Interest on loans taken to pay out dividends or redeem shares is not tax-deductible.

Interest limitation rules restrict tax deductibility in excess of financing costs over interest income (net financing costs) to 30% of an adjusted tax basis (basically, tax-adjusted EBITDA) or PLN 3m (whichever is higher). These laws apply to financing from all entities, including unrelated banks, and to all loans.

The financing costs are defined broadly as costs related to obtaining and using financial means from other entities (including unrelated entities), such as interest (including compounded interest), charges, commissions, premiums, interest paid on leasing installments, fines, and charges for late payments of liabilities, and hedging costs (including the costs of financial derivatives), regardless of the counterparty.

The financing costs that cannot be deducted for tax purposes in a given tax year may be deducted in the five subsequent years, within certain rules and limits. Apart from the above limitations, provisions preventing discrepancies in the tax qualification of hybrid structures (based on the ATAD II Directive) were also implemented into Polish CIT regulations.

Corporate income tax

Main rules

CIT is levied on the total income of legal persons, organizational units without legal personality, joint-stock limited partnerships, limited partnerships and registered partnerships, except for civil and professional partnerships, having their seat or place of effective management in Poland.  However, registered partnerships are not considered CIT taxpayers if all of their partners are individuals (then the partners are considered personal income tax (PIT) taxpayers).  If this criterion is not met, CIT transparency is available provided the registered partnership reports to the competent tax office information on all PIT and CIT taxpayers who have the right to participate in the partnership's profits.

The provisions of CIT law also apply to companies in the process of being established and so-called tax capital groups (i.e., a group made up of at least two commercial companies that meet conditions set out in the CIT law).

CIT is charged at a flat rate.  In 2024, the rate of corporate income tax is 19%.  However, a reduced 9% rate may apply to small taxpayers earning revenues equivalent to €2 million or less and for taxpayers starting a new business or their first tax year in operation, subject to certain limitations.  Moreover, a preferential 5% CIT rate may apply to qualified income from certain intellectual property rights.

The tax year ordinarily corresponds to the calendar year, unless a company decides otherwise in its articles of association or statutes.

Under the general rules, the company is obliged during the tax year to make monthly CIT advance payments by the 20th day of the following month.  Newly established companies and companies that reported for the previous tax year revenues from sales (including VAT) not exceeding €2 million may pay advance payments quarterly.   After the end of the tax year, an annual tax return must be filed and any tax due paid within three months.

Inter-company distributions

As a rule, dividends distributed between parent and subsidiary companies are taxed in Poland. Income from participation in the profits of a legal person is subject to a 19% tax rate. It is not combined with income from other sources. Dividends and certain other income from participation in a legal person are tax-exempt provided the recipient is a company that is tax resident in Poland or another EU/EEA member state, and that it holds at least 10% of the shares in that company for an uninterrupted period of two years. The two-year holding period requirement does not have to be met upfront. This exemption also applies to Swiss parent companies provided they have at least a 25% shareholding in Polish subsidiaries.

There are also several technical requirements to be met to benefit from the tax exemption, including obtaining a valid tax residency certificate of the dividend recipient and a relevant declaration on fulfillment of the tax exemption prerequisites. This tax exemption does not apply in situations where:

1. Benefiting from an exemption is contrary in the given circumstances to the object or purpose of provisions introducing an exemption;
2. Benefiting from an exemption was the main or one of the main goals of making a transaction or other activity or a number of transactions or other activities and the manner of acting was artificial.

The CIT law clarifies that the manner of acting is not artificial if, based on existing circumstances, it may be assumed that an entity acting reasonably and guided by lawful purposes would apply this manner of acting to a predominant extent for justified economic reasons.

Note that the Polish tax environment in Poland has changed drastically over the last few years and is currently rather strict. Thus, properly securing transactions from a potential tax anti-avoidance perspective is crucial.

Tax base and deductibility of expenses

The tax base for income from general business operations is determined based on profits pursuant to commercial accounts. The company is obliged to keep accounting books in a manner that allows for determination of the taxable base and the amount of tax due. Otherwise, income will be assessed by the tax authorities.

As a rule, taxable income is recognized on an accrual basis (i.e., when the invoice is issued but not later than the month in which the goods or services were supplied).  However, interest income is taxable in Poland on a cash basis, meaning that interest constitutes taxable revenue upon being received. Interest is also being deemed received when interest is compounded (added to the loan principal).

Generally, taxable income is calculated as the total taxable revenue of the taxpayer less tax-deductible costs. For expenditures to qualify as tax-deductible, they should be incurred with the aim of generating, saving, or securing the source of revenue. Moreover, expenses are deductible only if they are properly documented and/or evidenced. Certain expenditures, such as most penalties and fines or representation expenses, are by law not tax-deductible.

Capital gains

In addition to operating income (from general business operations), there is also a separate income basket for capital gains which includes income from securities, other financial instruments, shares in legal entities’ profits and property rights, such as copyrights, trademarks, and particular licenses. Income from capital gains is taxed at the standard 19% CIT rate and it is not aggregated with other sources of income. The regular CIT rate is applied against capital gains earned in Poland by both resident and non-resident companies. Relief from Polish taxation may be available to a non-resident company as long as the applicable double taxation treaty does not provide otherwise. Most of Poland’s double taxation treaties provide that gains earned on the disposal of securities and other financial instruments may be taxed only in the country in which the company receiving the income has its registered office or place of management (unless specific rules apply, such as in the case of real estate rich companies).

Tax incentives

1. Real estate tax exemptions: Local authorities may offer reduced rates or exemptions from real estate tax (RET), which is imposed on land, buildings, and infrastructures. Investors are advised to review, ahead of their project, local RET laws, so as to verify which investments may qualify for RET reliefs. Investors must also file with the local tax authorities, before any work on the project starts, a notification of their intention to use the RET reliefs available. RET benefits would be combined with and will reduce available Polish Investment Zone (PIZ) /Special Economic Zone (SEZ) exemptions.
2. R&D relief: The research and development (R&D) tax relief allows businesses engaging in R&D activities in Poland to deduct from their taxable basis 100% or (in case of personnel cost) 200% of the eligible R&D expenses, notwithstanding the use of these expenses as tax-deductible costs under the general rules. Expenses eligible for the R&D relief include a number of cost categories listed in the legislation, such as, subject to conditions, cost of employment of R&D staff, cost of R&D-related fixed assets, equipment and materials, cost of external R&D work and services purchased and the cost of legal protection of intellectual property.
3. Innovation Box – IP Box: The IP Box is another tool supporting R&D activities in Poland. Under this measure, qualified income of Polish companies from the commercialization of eligible intellectual property, such as patents or copyrights to computer software, is subject to 5% CIT (compared to the general 19% CIT rate applicable to corporate income). The IP Box can start applying even before specific intellectual property is registered, as soon as the application for registration of particular intellectual property is filed (and in the case of computer software, no registration is required at all).
4. Tax relief for robotization: Businesses are able to deduct 50% of eligible tax-deductible costs incurred for robotization (e.g., new industrial robots, machinery, peripheral devices, financial leasing of industrial robots and intangible assets essential to properly install and commission industrial robots and as well as training services relating to industrial robots). Not applicable for SEZ/PIZ beneficiaries.
5. Relief for innovative employees: Eligible R&D costs that cannot be utilized under the R&D Relief in a given tax year can be settled by appropriately reducing the PIT advances due on remuneration paid to qualified R&D personnel by the product of the unused costs and the income tax rate applicable to the taxpayer using the relief. R&D personnel includes persons who spend at least 50% of their total working time on R&D activities.
6. Relief on prototypes: 30% of the eligible costs of trialing the production of new products (excluding services) and placing them on the market (e.g., costs of research, expert opinions, obtaining or maintaining a marketing authorization or other mandatory documents and related fees) are deductible from income. Deduction cannot exceed 10% of business income. No combination is allowed with PIZ/SEZ.
7. Development relief: 100% of eligible tax-deductible costs incurred to increase revenue from the sale of products (e.g., costs of participation in trade fairs, promotional and informational activities, producing documentation required in tender procedures, adapting product packaging) is income deductible in two consecutive tax years, provided that: (i) the taxpayer records an increase in revenue from the sale of products compared to the same revenue as at the last day of the tax year preceding the year in which the cost was incurred, or (ii) it achieves revenue from the sale of products not previously offered, or (iii) it achieves revenue from the sale of products not previously offered in a given country. Only revenues generated from sales to unrelated entities on Polish and foreign markets will be considered. This relief is not subject to combination with relief under the PIZ scheme.
8. Investment deals: A deal with Polish tax authorities (for a fee) is available spelling out the tax consequences of new investments planned or started in Poland, worth at least PLN 100 million (or PLN 50 million, starting from 2025), including elements of tax rulings, GAAR opinions, Advance Pricing Agreements, Binding Excise Duty Information and Binding VAT Rate Information.
9. IPO relief: Expenses incurred directly for the purposes of making an initial public offering with the intention of applying for admission to trading on a regulated market or via an alternative trading system will be income-deductible. Caps on the deductible amounts: 150% of costs for preparation of prospectus, court/notarial/stock exchange fees and 50% of costs of legal and financial advisory services (max. PLN 50,000).
10. Consolidation relief: Taxpayers acquiring shares/stocks in a company (that is unrelated, existing for at least two years, with the same or supporting business activity) may be able to deduct the costs of such transactions (e.g., costs of legal services, taxes directly levied on that transaction and notarial and court fees – excluding the cost of the stocks/shares themselves and the costs of financing) from their income. It is necessary to retain the ownership of the acquired shares/stocks for three years, otherwise the tax base will be increased by the amount of the deduction. Up to PLN 250,000 may be deducted.
11. Venture Capital relief: 50% of the costs of acquiring (subscribing for) shares/stocks in an alternative investment company or a company in which an alternative investment company holds at least 5% of shares/stocks are income-deductible, provided the shares/stocks are held for at least two years. Up to PLN 250,000 may be deducted.

Each one of the incentives is governed by its own rules, resulting from tax provisions and tax practice. Therefore, the possibility of benefiting from incentives depends on the taxpayer’s situation, each time requiring a separate analysis.

Controlled foreign companies (CFC)

Polish tax residents (both legal entities and natural persons) are liable for CIT and personal income tax (PIT) on the profits earned by their controlled foreign companies (CFC), even if the income is not distributed by the CFC. Apart from legal persons and organizational units without legal personality, the CFC regime covers various types of entities, such as foreign foundations, trusts, foreign capital groups (including member companies) as well as organizationally or legally separated parts of foreign companies, which meet specific criteria set out in the tax provisions.

The CFC regime does not apply to entities subject to taxation on their worldwide income in the EU or an EEA member state if such companies carry out material and genuine economic activity in this member state.

Special CIT regime (so-called “Estonian CIT”)

JSCs, LLCs, limited partnerships, limited joint stock partnerships and simple joint stock companies having natural persons as their only shareholders may opt for a lump-sum CIT taxation that allows inter alia for a deferral of tax payment until the profit distribution or for relaxed reporting obligations (known as ‘Estonian CIT’). Estonian CIT rates are 10% (for small taxpayers and start-ups) and 20% (for other taxpayers).

However, the above is subject to certain conditions pertaining to, e.g., the company's ownership structure (the shareholders of such companies must be natural persons), the types of revenues and the level of employment (ultimately at least 3 employees or permanent contractors). 

Minimum CIT levy applicable to owners of leased buildings

A so-called “minimum CIT levy” applies to the owners of leased buildings. The tax base is the gross (initial) tax value of the buildings owned by a given taxpayer decreased by PLN 10 million (approx. € 2.2 million). The resulting amount is taxable at the rate of 0.035% per month (0.42% per year). In addition, the minimum CIT levy does not apply if the total share of the usable space of the building leased does not exceed 5% of the total usable space of that building.

Taxable persons do not have to pay this tax if it is lower than the CIT installment for the month calculated under the general CIT rules.  Furthermore, the minimum CIT levy is deductible from the CIT due calculated under the general rules.

Taxable persons may apply for a refund of the minimum CIT levy after the end of a given tax year, provided certain conditions are met.

Sale of shares in real estate companies

Polish tax law contains a complex definition of a real estate company and imposes certain obligations on such vehicles. 

It is noteworthy that capital gains crystalized upon sale of shares in a real estate company are shifted from the seller to the real estate company being sold (acting as a tax remitter) if:

1. The seller is a non-resident from a country with no double tax treaty with Poland or with a double tax treaty that includes so-called “real estate clause” and
2. The transaction is effected on shares or shareholding interests carrying at least 5% of the voting (or similar) rights in the company.

Real estate companies (whose shares are sold) are obligated to pay (using funds provided for this purpose by the taxpayer, i.e., the seller of the shares) a 19% tax advance on the shareholder's capital gain by the 20th day of the month following the month in which the foreign shareholder earned income (the company's shares were disposed), and – if the real estate company has no adequate information to calculate the tax base – the 19% tax advance should be paid on the market value of the shares being disposed of.

In addition, real estate companies from outside the EU/EEA are obligated to appoint a tax representative in Poland to discharge remitter duties. The representative will discharge the taxpayer’s duties if shares in the company are sold and will be jointly and severally liable with the real estate company in this regard. Failure to appoint a representative may attract a maximum penalty of PLN 1 million.

Exit tax

An exit tax applies with respect to income on unrealized profits, concerning cross-border transfer of assets within the same taxpayer or change of tax residency. The taxable basis is the sum of income from unrealized gains established for individual assets. In turn, the income from unrealized gains is the surplus of the market value of the transferred assets determined as at the date of transfer (e.g., as a result of a change of tax residency) over their tax value. A 19% tax rate shall apply to corporate income taxpayers, whereas personal income taxpayers may be taxed at 3% or 19% (depending on the situation).

Minimum income tax

The minimum income tax should be payable by Polish tax residents (companies and tax capital groups) and non-residents doing business via a foreign permanent establishment located in Poland which:

1. Incurred a loss in a given tax year from a source of income other than capital gains or
2. Whose taxable income represents less than 2% of their revenues (other than from capital gains).

The minimum income tax rate is 10%. The CIT Act provides for specific rules outlining two methods of establishing the tax base. The first method assumes that the initial tax base is 1.5% calculated on the income from general business operations, increased by the debt financing costs (to the extent they exceed 30% of tax-adjusted EBITDA) and certain costs for intangible services incurred by the taxpayer. Alternatively, the taxpayer might opt for the simplified method, in which case the tax base is 3% of the operating income earned in the tax year.

Certain categories of entities are exempt from the obligation to pay minimum income tax and the amount of the minimum income tax payable may be reduced by the amount of the regular CIT due for the same tax year. The amount of minimum CIT paid for a given tax year may be deducted from the regular CIT liability during the following consecutive three tax years.

The first reporting and payment of minimum income tax will take place in 2025 with respect to income accrued in 2024. 

Tax on shifted profits

Tax on shifted profits is aimed at eliminating the possibility of obtaining tax advantage through tax schemes designed to transfer income to jurisdictions with a low effective tax rate.  The tax on shifted profits – charged at 19% of the tax base – applies to both Polish residents and non-residents having a permanent establishment in Poland, engaged in transactions with related entities.

The tax base consists of fees paid directly or indirectly to affiliated parties for: (i) various intangible services; (ii) fees for the use of IP rights; (iii) fees for the transfer of the risk of debtor insolvency; (iv) financing costs; and (v) fees for transfer of functions, assets or risks.  These payments constitute taxable “shifted profits” only if the following two conditions are jointly met:

1. The share of the above costs, paid to related entities, exceeds 3% of the total amount of tax-deductible costs
2. The share of the above costs in the total revenues of the related entity is at least 50%
3. The effective tax rate of the related entity is lower than 14.25% and
4. At least 10% of the above payments are passed on by the related entity to another entity (e.g., through dividend payments).

Provisions on tax on shifted profits do not apply to fees paid to a related party that is a tax resident in an EU/EEA country and conducts “material genuine economic activity” in that country.  Importantly, the regulation provides for different criteria for assessing the nature of business activities than those known under the regulations on controlled foreign companies (CFC).

Polish Holding Company

There are special tax preferences for companies considered from a tax perspective as Polish Holding Companies (PHCs).  LLCs, JSCs or simple joint stock companies may act as such for tax purposes if they:

1. Are Polish tax residents and not members of a tax capital group
2. Actually engage in business activities (CFC rules apply accordingly;
3. Do not benefit from certain tax exemptions
4. Hold directly at least 10% of shares in the capital of a subsidiary (as defined in the CIT laws) and
5. Do not have shareholders (including indirect shareholders) that are entities headquartered in tax havens or jurisdictions where no legal grounds exist for tax information exchanges.

Moreover, there are certain conditions for subsidiary companies to qualify under the PHC regime.

There is an additional requirement that holding and subsidiary companies comply with all conditions for the PHC regime for an uninterrupted period of 2 years.

The special tax regime provided for PHC consists of the following two preferences:

1. A CIT exemption available to dividends received by holding companies from their subsidiaries (with multiple restrictions on dividends paid by foreign companies, except for EU/EEA based companies actually engaged in material genuine business activity (CFC rules apply accordingly))
2. A full CIT exemption available to capital gains derived from the sale of shares in (Polish or foreign) subsidiaries to non-related parties provided the sale is reported to the tax office ahead of the transaction. The exemption does not apply to, among other things, the sale of shares if at least 50% of the value of the sold companies' assets is accounted for (directly or indirectly) by real property located in Poland or rights to such property.

Polish family foundation

The purpose of the Polish family foundation is to facilitate intergenerational succession without the heirs liquidating the testator’s assets.  It is intended, in particular, to protect companies from the negative consequences of succession processes, including those related, for example, to the lack of some heirs’ interest in continuing the business, or situations involving a large number of heirs.

A family foundation has a legal personality and is able to carry out certain permitted business activities.

A family foundation provides certain tax incentives:

1. The establishment of a family foundation and the transfer of assets to it will not be subject to taxation
2. Income from its operations (so long as they fall within the list of permitted activities) is exempt from CIT (with certain exceptions)
3. A family foundation pays 15% CIT only when benefits are transferred to the founder or beneficiaries.  If its activities go beyond the permitted statutory scope, this part of the foundation’s income is taxed at a “penalty” 25% CIT rate
4. With respect to beneficiaries, the payment of benefits by the foundation is exempted from personal income tax as well as inheritance and gift tax in the situation where the beneficiaries are individuals from the so-called zero tax group (the founder’s immediate family).  The benefits received from the foundation are subject to (i) 10% PIT if the beneficiaries are from the so-called I and II tax groups or (ii) 15% PIT if the beneficiaries are unrelated to the founder.  In a situation where there is more than one founder, the exemption and 10% PIT rate apply to the taxable income determined in proportion to the assets contributed by related founders which remain in the total assets of the foundation
5. The liquidation of the foundation and the related distribution of assets are also subject to 15% corporate income tax (it is possible to recognize tax deductible expenses at the time of liquidation, i.e., reducing income by the historical tax value of the assets contributed to the foundation by the founder).

Additional reporting obligations for CIT taxpayers

Report on the implementation of tax policy

Tax capital groups and taxpayers whose income in the previous tax year exceeded the equivalent of €50 million are obliged to prepare and publish information on the implementation of tax policy for the tax year.  This information shall include, for example:

1. Information on the taxpayer’s processes and procedures for managing the performance of tax law-related obligations ensuring compliance, and on voluntary forms of cooperation with the NFA
2. Information on the taxpayer’s compliance with tax obligations in Poland, including information on the number of notifications of tax schemes provided to the Head of the NFA with a breakdown into different tax types and
3. Information on transactions with related entities with a value exceeding 5% of the balance sheet total of assets within the meaning of accounting regulations, as determined on the basis of the company’s most recent approved financial accounts.

Information on the tax policy implemented must be published on the website of the taxpayer (or related entity if the taxpayer does not have its own website).  In the event of a failure to meet the new obligations, taxpayers may face a penalty of up to PLN 250,000.

Notification on shareholders of the real estate company

Real estate companies and taxpayers holding directly or indirectly a stake carrying at least 5% of the voting rights in a real estate company are required to provide the Head of the NFA by the end of the third month after the tax year end (and in the absence of a tax year – by the end of the third month after the end of the financial year), by means of electronic communication, the following information as at the last day of the tax year of the real estate company, or if the real estate company is not an income tax payer, as at the last day of its financial year:

1. In the case of information reported by real estate companies, the entities holding directly or indirectly shares in the real estate company and
2. In the case of information reported by taxpayers who are real estate company shareholders, the number of shares or shareholding interests held, whether directly or indirectly, in the real estate company.

Information on terms of payment in commercial transactions

Moreover, tax capital groups and taxpayers whose income in the previous tax year exceeded the equivalent of €50 million must submit information on payment terms in commercial transactions. Generally, such information should be submitted for a given year by January 31^st of the following year.

Publication of tax data

The individual tax data concerning real estate companies, tax capital groups and taxpayers whose income in the previous tax year exceeded the equivalent of €50 million are annually published by the Minister of Finance. This data covers e.g., taxable revenue, tax deductible costs, taxable income and tax paid. Such information for a given tax year is published by the Ministry of Finance by September 30^th of the following year.

Cross-border payments

Transfer pricing

Transfer pricing regulations in Poland are based on the standards of the Organization for Economic Co-operation and Development (OECD).  Where the prices agreed upon between related parties differ from prices which would have been agreed upon between non-related parties in similar circumstances, the tax authorities have the right to assess the income and tax due.  Transfer pricing obligations in Poland also concern transactions with tax haven entities.

Transfer pricing obligations have to be fulfilled within the regulatory deadline which is the year following the year to which the obligations refer.  This means that the deadline for fulfilling transfer pricing obligations with regard to 2023 falls in 2024.

Local transfer pricing documentation (a 'local file') has to be prepared within 10 months after the end of the tax year.  The local file must be prepared each year and include transactions with a value over the statutory thresholds.  Depending on the type of transaction, the threshold is PLN 10 million (for sales and purchases of goods and financial transactions) or PLN 2 million (for services and other transactions).  For transactions with tax haven entities the threshold is PLN 2.5 million for financing and PLN 0.5 million for other transactions.

For each transaction in the local file, a transfer pricing analysis (benchmarking analysis) must be prepared.  An exception to the obligation to prepare a transfer pricing analysis applies to transactions involving tax havens and to micro and small businesses.  Additionally, information on transfer prices (TPR form) must be filed each year.  In the TPR form, the taxpayer must provide information about transactions with related entities such as type of transaction, value, and outcome of the benchmarking analysis TPR has to be filed within 11 months after the tax year.  In the TPR the taxpayer also states that:

1. Transfer pricing documentation for the year has been prepared
2. The prices set in the transactions described therein are at arm's length and
3. The transfer pricing documentation as prepared is true and accurate.

TPR must be signed by the head of the unit or the chosen member of the management board and submitted electronically within 11 months after the end of the tax year.

Taxpayers are also obliged to have a master file if they meet the following conditions: (i) the entity is required to prepare a local file; (ii) the entity belongs to the group of related entities for which consolidated financial statements are prepared; and (iii) consolidated revenues of the group exceeded PLN 200 million in the previous financial year.

Domestic transactions (between Polish taxpayers and Polish branches of foreign taxpayers) are excluded from the documentary obligation under certain conditions, for example, where neither party to the transaction benefits from special tax exemptions (e.g., is active in a Special Economic Zone) or incurs a tax loss. 

Following a request from the tax authorities, a company has 14 days to submit transfer pricing documentation.  The tax authorities may request the preparation of such documentation for transactions that are below the statutory documentation threshold, if they suspect that the value of the transaction was understated in order to avoid the documentary obligation.  In this case, the taxpayer has 30 days to submit the documentation.

Polish tax law provides regulations regarding the negotiating and concluding of Advanced Pricing Arrangements (APAs).  By concluding an APA, the Ministry of Finance confirms that the prices set out in related party transactions are at arm's length and that the taxpayer correctly selected the transfer pricing method.  Tax authorities do not question transactions that are covered by an APA.  There are three types of APAs: unilateral (covering cross-border or domestic intra-group transactions), bilateral or multilateral.

There are also safe harbor rules for two types of transactions:

1. Loans meeting specific requirements - an official announcement on the arm's length level interest rates is published each year and
2. Low-value-added services - cost plus or TNMM method has to be applied and the mark-up should be no less than 5% if the Polish company provides services and no more than 5% if the Polish company acquires services.

Tax authorities do not question the level of remuneration in a transaction if safe harbor rules apply.  For such transactions, local file and benchmarking analyses are not required.  There is also no obligation to prepare transfer pricing documentation and analysis for a simple recharge without mark-up (under certain conditions).

TP adjustments are generally allowed, but taxpayers are obliged to meet a number of requirements for the transfer pricing adjustment to be recognized for tax purposes.

Under Polish tax law there are sanctions for not complying with transfer pricing regulations.  In the event of a decision on incorrect pricing in a controlled transaction the additional tax liability will be 10% of the amount of overstated loss or understated income.  In certain cases, the additional tax liability may be 20% or 30% of the overstated loss or understated income.

Moreover, there is penal-fiscal responsibility for the company's head of unit or management board for failing to submit a statement or for submitting a false statement on having prepared transfer pricing documentation and a TPR form.

Withholding tax (WHT)

A Polish company that makes certain payments to a non-resident may be obliged to withhold tax from such payments.  The withholding tax regime applies to:

1. Royalties
2. Interest payments
3. Dividends and other revenues from participating in the profits of legal persons and
4. Certain intangibles services.

Payments of dividends and other revenues from participation in the profits of legal persons having their registered office in Poland are generally subject to 19% WHT. The WHT rate may be reduced with respect to foreign taxpayers based on double tax treaties (DTTs) between Poland and the country where the taxpayer is resident provided that, e.g., the taxpayer supplies the Polish tax remitter with a valid certificate of tax residence issued by the relevant tax authority in the country the taxpayer is resident in (other documents may be required as well).

Under the implementation of the EU Parent Subsidiary Directive (PSD), dividends paid by Polish subsidiaries to their parents in the EU, the EEU or Switzerland may be exempt from Polish withholding tax, provided that certain conditions are met.

Payments of interest and royalties to foreign companies are subject to a 20% withholding tax in Poland unless a relevant double taxation treaty provides otherwise, and a respective tax residency certificate is held by the Polish payer. Poland also implemented EU Directive 2003/49/EC on a common system of taxation applicable to interest and royalty payments made between associated companies of different member states (the Interest and Royalties Directive, IRD). Therefore, interest payments between an EU parent and subsidiary, or between direct sister companies (in all cases, a minimum 25% interest and two-year holding period is required) are free from withholding tax.

To benefit from the exemption set forth by Polish regulations implementing the IRD, the payer should hold the recipient’s certificate of tax residence. Moreover, the payer should obtain from the beneficiary a written statement confirming that: (1) the beneficiary does not enjoy exemption from income tax on its entire income, irrespective of its source; (2) a minimum 25% interest of the shareholder both in the payer and the beneficiary (in the case of sister companies); and (3) the recipient is the beneficial owner of interest or royalties paid.

A beneficial owner is an entity that: (1) receives a payment for its own benefit (decides on its own how to use it and bears the economic risk); (2) is not an intermediary, representative, trustee or any other entity obliged to transfer all or part of the payment to another entity; and (3) conducts a genuine economic activity in its country of residence. When assessing whether an entity is eligible for WHT preferential treatment, it is necessary to consider the nature and scale of the entity’s operations with respect to the amount of the receivables received.

The taxpayer is obliged to demonstrate due diligence in verifying the possibility of applying a reduced tax rate or an exemption in respect of payments subject to WHT.  The issue of due diligence is assessed through the prism of relations (within the meaning of transfer pricing regulations) linking the withholding tax remitter and the taxpayer.

Under the “pay and refund” regime, for dividends, interest or royalties paid for the benefit of related entities which are not Polish tax residents, and which exceed PLN 2 million per recipient during the tax year, the tax remitter (i.e., the Polish company) is generally obliged to collect and remit WHT based on the standard Polish WHT rates (being 19% or 20%, as the case may be). Then, upon the taxpayer’s or tax remitter’s request, the WHT can be refunded after the tax authorities examine the possibility of applying a lower WHT rate or tax exemption.

The pay-and-refund mechanism also applies if it is determined that an amount payable was paid and the said amount was not classified as a payment on account of dividends, interest or royalties without a valid business reason. 

Nevertheless, the tax remitter may apply a lower WHT rate or WHT exemption if it submits a declaration to the tax authority that it holds all documents required by tax law authorizing it to apply a preferential WHT regime and confirming that it has no knowledge of any circumstances that might exclude preferential WHT treatment of the payment at hand (see also the section Taxation Authorities above with respect to WHT preference eligibility opinion).

Multilateral Instrument

Poland ratified a Multilateral Instrument to Modify Bilateral Tax Treaties (MLI) and declared 78 double taxation treaties to be covered by the MLI. The MLI entered into force regarding Poland’s double tax treaties with, inter alia, Australia, Austria, Belgium, Canada, Cyprus, Czech Republic, Denmark, Japan, Finland, France, India, Ireland, Israel, Latvia, Lithuania Luxembourg, Norway, Qatar, Russia, Slovakia, South Korea, UAE, Ukraine and the United Kingdom.

International tax reform

On October 8, 2021, Poland, along with 135 other countries, committed to a two-pillar plan for international corporate tax reform that supports the OECD Inclusive Framework’s “Tax Challenges Arising from Digitalisation” project. On October 11, 2023 the OECD published the text of a consensus-based Multilateral Convention to implement Pillar One. It is yet unknown when the convention will come into force, as it needs to be ratified by at least 30 jurisdictions including those that are home to at least 60% of in-scope multinational enterprises (MNE).Poland supports the implementation of Pillar One, however, the Polish government has not shared any information about actions planned or taken in this regard. 

With regard to Pillar Two, in December 2022, the Council of the European Union unanimously adopted the directive ensuring a global minimum level of taxation for MNE groups and large-scale domestic groups in the Union. As a member state, Poland was obliged to bring into force the laws, regulations and administrative provisions necessary to comply with this directive by December 31, 2023. Unfortunately, Poland did not adopt the regulations in time. However, just recently the Polish government presented a draft bill introducing the Pillar Two regulations. It is expected that the regulation will pass through the whole legislative process in 2024 and come into force in 2025. 

CESOP reporting

As of January 1, 2024, obligatory reporting for payment institutions was introduced (as the result of implementation of Council Directive (EU) 2020/284.  Based on the new requirements, certain institutions are obliged to report payments made for foreign payment receivers once the statutory threshold is exceeded.

Payroll taxes

There are no specific payroll taxes in Poland, besides social security contributions and Personal Income Tax (12/32% deducted from employees’ salary by the employer acting as a tax remitter). As a rule, the employer is obliged to withhold the employees’ social security contributions from their salary and remit it to the Social Security Authorities. The effective rate for the employee is roughly 9% of gross salary. Additionally, the employer is obligated to pay its own share of the contributions, with the effective rate at roughly 19 to 22% of gross salary. Both payments are made monthly and might constitute tax-deductible expenses for both the employer and the employees.

Indirect Taxes

Value-added tax (VAT)

Supplies subject to VAT include goods and services for consideration, export of goods, import of goods, intra-Community acquisition of goods for consideration and intra-Community supply of goods.  The supply of goods is construed to mean the transfer of a right to dispose of the goods as an owner, such as a sale or exchange.  It also means, among others, the transfer of ownership in exchange for compensation, release of goods pursuant to a finance leasing agreement within the meaning of the CIT Law, commission sales and establishing or transferring the right of perpetual usufruct to land and other property rights connected with the premises.

The supply of services is construed to mean any performance that does not constitute the supply of goods.  This definition encompasses anything that cannot be determined as a supply of goods.  The import of goods is understood as the importation from outside the EU and is subject to import VAT.  Exportation outside the EU is also subject to VAT, but may benefit from the 0% VAT rate provided certain conditions are met The scope of intraCommunity supplies and acquisitions covers purchase, sale as well as transfers of goods.  In such intra-Community transactions, VAT is settled pursuant to the reverse-charge principle: the supplier applies a 0% rate (some documentation conditions should be met), while the purchaser self - accounts by applying its own, domestic rate.

VAT payers that have neither a registered seat nor a fixed place of business in Poland or in another EU member state are obliged to appoint a fiscal representative (except taxpayers from the United Kingdom and Norway).  VAT payers having a registered seat or a fixed place of business in another EU member state may appoint a fiscal representative.  The fiscal representative is jointly liable with the trader it represents for all Polish VAT liabilities settled by the fiscal representative on behalf of and on account of the trader.

The basic VAT rate is 23% and it is applicable to the majority of goods and services.  The reduced rates are 8%, 5% and 0%.  For example, the 8% rate is applicable to some goods connected with healthcare, groceries, hotel services and transport of persons and the 5% rate applies to edible products of animal origin, printed books, newspapers, and sanitary products.  The 0% rate refers mainly to intra-Community supply of goods and export of goods but also to some local sales of dedicated products.  0% rated sales are also treated as taxable sales.  Taxpayers can apply for a Binding Rate Information – valid information on the VAT rate applicable for a given good or service (the information is binding for the tax authorities and valid for five years).

Under general rules, a taxpayer may recover input VAT (the exceptions are listed in the VAT Act).  VAT payers have the right to reduce the amount of output VAT by the amount of input VAT when purchasing goods and services in connection with taxable business purposes.  Input tax directly related to making VAT-exempt supplies is generally not recoverable.  It can be deducted as a cost for corporate income tax purposes, with some exceptions (e.g., in some cases input VAT related to financial services rendered to entities established outside of the EU may be recovered).

If a taxpayer makes both exempt and taxable supplies, then it will not be able to recover input VAT in full, and only a portion of the VAT can be reclaimed.  To determine the amount of VAT that may be recovered in this situation, the taxpayer calculates the VAT ratio, which is the ratio of turnover made on taxable supplies to the total turnover. The ratio is subject to correction at the end of the tax year. The excess of input VAT over output VAT reported in a given VAT return may be refunded or carried forward against future VAT liabilities. Refunds are generally made within 60 days, but under certain conditions at the taxpayer’s request the VAT is refunded within 180, 40 or 25 days

In principle, under Polish VAT regulations, the tax point arises when the goods are supplied or the services are completed.  The tax point for an advance payment or prepayment received before the goods are released, or before the services are completed is the date payment is received.  Notwithstanding the foregoing, for selected goods and services, such as electricity, telecommunications and leasing, the tax point is the time the VAT invoice is (or should be) issued.

VAT is calculated by the taxpayer and should be paid on a monthly or quarterly basis by the 25th day of the month following the month/quarter for which it is payable. Settling VAT on a quarterly basis is possible only for: (1) taxpayers whose sales did not in the previous fiscal year exceed the amount of €1.2 million (including tax); (2) taxpayers conducting certain financial or intermediary activities, whose service fees did not in the previous fiscal year exceed the amount of €45,000 (including tax); or (3) taxpayers who opted for Estonian CIT and whose sales did not in the previous fiscal year exceed the amount of €4 million (including tax).  However, VAT regulations also provide for a list of criteria eliminating certain taxpayers from settling the VAT on a quarterly basis.

Moreover, as of January 1, 2023, a solution allowing related entities to create a VAT group was introduced.  Activities carried out between members of a VAT group are VAT neutral.

A VAT group may be composed of domestic entities and Polish branches of foreign entities related:

1. Financially
2. Economically and
3. Organizationally.

A VAT group is a new VAT taxpayer (its creation automatically results in the entities forming the group losing their status as VAT taxpayers).  A VAT group is represented by one of its members, acting as a representative of the VAT group. A VAT group is created by concluding an agreement on the establishment of a VAT group (it should, among others, provide for the period for which the VAT group has been established – a minimum three years).  An entity is allowed to belong to only one VAT group.  Moreover, it is not possible to make any changes to the composition of the VAT group during its existence.  Members of a VAT group are jointly and severally liable for its VAT obligations (both during and after the end of its operation).

Furthermore, the obligatory National System of e-Invoices (the so-called “KSeF”) is expected to enter into force in Poland as of February 1, 2026 for entities with turnover exceeding PLN 200 million in the previous year. The bill has already been adopted by the Parliament and – on May 23 2024 – forwarded to the President for his approval. It is also expected that KSeF should come into force as of April 1, 2026 for other taxpayers, however, the respective regulations have not yet been published. Originally, the KSeF was supposed to come into force starting of July 1, 2024, however, the date was postponed by the government due to technical irregularities in the system. 

Currently, the taxpayers may use a voluntary version of KSeF.  The system is designated for issuing, receiving and storing structured invoices, each having its own identification number.  Once KSeF becomes mandatory, all invoices issued by a taxpayer should remain in line with the logical structure and requirements imposed by KSeF.  Generally, it will not be possible to issue invoices in other forms, thus paper and electronic invoicing in the current form will not be possible.

Split payment

Under the existing voluntary business-to-business (B2B) split payment system, all businesses have VAT accounts established for them by the banks running their regular accounts. A purchaser of goods or services can choose, at its sole discretion, to pay the entire amount due to the seller or provider into their regular bank account, or to split the price payment between the net amount allocated to the seller’s or provider’s regular account and VAT amount allocated to their VAT account.  Amounts deposited in the VAT accounts can only be used by taxpayers for specific purposes listed in the legislation, including payment of VAT to tax authorities or payment of VAT part of the price to their own supplier’s or provider’s VAT account.

Under certain conditions, taxpayers in regular VAT situations can also request a local tax authority to agree that the amounts available in their VAT accounts be released into these taxpayers’ regular accounts. Tax authorities are required to decide on such requests within 60 days. Various tax benefits are available to taxpayers using the split payment mechanism in their transactions.

Mandatory split payment applies to selected businesses, such as trading in electronics, steel, motor vehicles, coal and construction service. The obligatory mechanism applies to transactions exceeding a threshold of PLN 15,000 gross.

Tax on civil law transactions (TCLT)

TCLT is imposed on certain types of transactions including sales agreements, loan agreements, and the establishment of mortgages or articles of association. Tax rates vary between 0.5 and 2%, where certain actions are taxed at a 20% penalty rate, including if in the course of the tax audit or tax proceedings the taxpayer confesses to concluding a loan agreement, an irregular deposit or establishing an irregular usufruct, or their change, and the tax due on these activities has not been paid.

The general rule provides that transactions (other than those defined as articles of association and its amendments) that are subject to VAT or exempt from VAT (with certain exceptions) are not covered by TCLT.

For example, the sale of shares and partnership interests in Polish entities is subject to a 1% TCLT, which is payable by the buyer. Sale of shares in JSCs may be exempt from the 1% TCLT under certain conditions, such as if a brokerage house acts as an intermediary in the transaction. In general, granting loans is subject to 0.5% TCLT, although certain exemptions may apply (as mentioned above in the section on “Debt financing”).

Real estate tax

Real estate tax generally applies to the owners, perpetual usufructuaries and freeholders of properties.  It applies to land, buildings or parts thereof, and constructions or parts thereof connected with business activities.  It is payable to local authorities, which set the real estate tax rates within the statutory maximum rates.

The maximum real estate tax rates in 2024 are as follows:

1. Land used for business activities: PLN 1.34 per square meter
2. Buildings or parts thereof used for business activities: PLN 33.10 per square meter of usable surface
3. Constructions or parts thereof used for business activities: 2% on the initial value of a construction, adopted for tax depreciation purposes.

It should be noted that significant amendments to real estate tax laws are expected to come into force as of the beginning of 2025. In 2023, the Polish Constitutional Court held that the definition of a “construction” in Polish real estate tax laws was imprecise and unconstitutional. Consequently, legislative bodies are required to revise this definition. Despite these developments, the Polish government has not yet presented any specific amendments to the real estate tax regulation, however, the contemplated adjustments are supposed to be based on the current definitions provided for in the real estate tax laws. 

1. As a rule, the representative office may not conduct business but only marketing and promotional activities of its parent company.↩